Creating or taking over a business requires a substantial financial investment from the project owner in order to create or acquire the desired company or business. This approach is generally prepared by a stage of reorganization and rationalization of the personal finances of the future entrepreneur.
How can credit consolidation help a buyer?
This allows him, on the one hand to improve his borrowing capacity for future financial operations, on the other hand to prepare relations with his future financial partners since the management of his personal finances and those of his future company will be strongly linked. To simplify and optimize its financial situation, the entrepreneur can choose to consolidate his personal credits in order to free up his investment capacities in his future company.
When a creator or a buyer decides to embark on a new professional project, he expects to have to pay attention to his personal expenses during the launch of his new activity. In general, the latter is engaged in several credits of different kinds that squeeze its debt capacity. The renegotiation of personal credits can facilitate the recovery process in a number of ways.
- On the one hand, pooling loans improves the personal finances of the future manager by lengthening the duration of the loans and reducing the monthly payments. The latter can thus reduce his monthly expenses and ease the constraints related to his monthly expenses at a time when his leisure time and free time allow him to evacuate the tension and stress of his new professional life.
- On the other hand, the amount of grants, subsidies and guarantees given to the manager to assist him in the implementation of his project is linked to the manager’s personal investment capacity. Reducing the amount of monthly payments frees up its investment capacity. By using jointly the increase of its investment capacity, the external aids (subsidies, loan with zero rate, …) and the financial leverage effect, the entrepreneur can optimize significantly his budget of creation or recovery. He can better work on his project or acquire a company in good financial health and reduce the risks related to his project.
- Finally, the simplification and rationalization of the manager’s indebtedness facilitates the granting of professional loans. Although the personal finances of the leader and those of his company are independent, the financial partners will not fail, when they are asked, to condition the aid requested to the personal situation of the leader. This is done for example on the analysis of its debt ratio, or for a request for a deposit.
Consolidation of credits is a proactive approach that allows entrepreneurs to prepare to financially support their project rather than suffer the situation.
The grouping of credit to contribute to the development of society
Once the company is created or bought back, to develop the business, managers often use short-term financing tools to finance machine purchases or ad hoc investments. Over time, these financings accumulate and end up costing both in terms of financial costs and administrative follow-up. Grouping the credits of a company can have a triple action on the management of the company.
- This simplifies the administrative follow-up of the company. Although often forgotten or minimized the regulatory and administrative weight of a loan represents a significant loss of time (negotiation, file, follow-up, …) and leads to additional management costs which, even if they are hidden, are not less impacting.
- Loan renegotiation is often an opportunity to review credit conditions, extend the term and reduce the amount of monthly payments. Used well, this tool improves the management of the company.
- The credit pool also frees up cash and allocates it to business development or other productive and strategic investments.
Many companies use credit consolidation when the financial situation is tight. This defensive use is often beneficial since it reduces the debt ratio and the fixed costs related to repayment. When profitability improves, managers can study the interest of repaying all or part of the balance in advance. It is also possible to use the credit consolidation in a more active and strategic way. For example when the development of the company requires a new personal investment of the founder or when it is interesting to create an SCI, …
The democratization of the credit redemption makes it possible to get an idea of the help that it can bring to each stage of the life of a company. It is often a good management support at the time of its creation, its purchase or when the activity is reduced and the financial pressure is stronger. It can also be used to contribute to the development of the company by helping the manager optimize his financial resources. The life of a business is often linked to the ability to have the financial resources to go through the steps it encounters. For the manager, a good management of his personal and professional accounts is an asset too often forgotten while well used, he could contribute actively to the success of his projects.
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